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Strategy Saturday
SS19: The Step-By-Step Process of Purchasing a Multifamily Property
April 25, 2021
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Welcome to Strategy Saturday; I’m Charles Carillo and today we’re going to be discussing the process of purchasing a multifamily property; from building your team to closing on the property.

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Transcript:

Charles:
Welcome to Strategy Saturday; I’m Charles Carillo. And today we’re going to be discussing the step-by-step process of purchasing a multi-fit property. So in this episode, we’re have two parts of it. The first portion of it, I’m going to talk more about prior to purchasing a property. And the second part of it is going to be actually the process of purchasing a property and all within this one episode. So before you’re buying a property, make sure that you’ve set your goals. One, five, 10, and 15 year goals. And knowing that what you’re trying to achieve when you’re purchasing a property, I call it performing a self-evaluation. And he did an episode on strategy Saturday, a few episodes back where you can check that out for the in-depth detailed version of it, but figuring out in a brief what you’re good at, what do you need assistance with?

Charles:
What are your resources? So if you have money, maybe you’ve experienced, maybe have partners that have the other one that you don’t have set your investment criteria. You want to pick the market markets, possibly the neighborhoods number of units. You’re looking for purchase price and the class of property that you’re targeting. Start building your team and keep all the contacts in the CRM. When I’m looking for team members, I’m usually trying to utilize the team members of other investors in my market, preferably ones that are buying similar sized properties to me. Cause then you know that the people that they’re working with will work with that class properties, brokers. You want to start finding brokers in your name and your markets in the neighborhoods that focus on your target properties. I start looking for property managers, find brokers and property managers on LoopNet. So ask brokers, if they’re selling a property, who would you have manage this property and get their information.

Charles:
Start reaching out to lenders, brokers, local banks, and credit unions. You need at least one broker that works with agency debt agency debt is Fannie Freddie Mac. When you have loans over a million dollars. So that’s a very important thing to have in your CRM. You want to find a nationwide insurance agent. You want to find a real estate attorney in a litigation attorney. There’s two separate types of attorneys and definitely two different types of costs for each of them start networking. So I’s like networking through local groups, local meetups, whether it’s virtual or whether it’s face to face, face to face, being the best and start finding people that you might need for your, for your, as a partner to fill out your whole investment group, figure out are you going to partner at all? If maybe if it’s a smaller property, you don’t have the partner.

Charles:
If you do have the partner start reaching out to potential partners who compliment your strengths. So for instance, maybe you’re an analytical person. You need someone that’s outgoing to deal with brokers, deal with investors. This is where the networking comes in and partnering comes in. I start reaching out the deal sponsors, if you need one deal, sponsors are, if you don’t have the net worth or the experience to close on the deal, what you’ll do is your going to have someone that’s looking to be a little bit more seasoned that can sign on the loans for you. And that’s what a deal sponsor is. And you can usually find these at local meetups as well. They’re going to be seasoned investors that would be happy to get a part of the deal for just signing on start reviewing deals and underwrite them. You can get these deals from brokers.

Charles:
You can look at deals from Craigslist, find properties there, or place a wanted ad. There. You can find deals and classify it. It’s a lot of paper classifieds. A lot of older investors are going to place deals for sale that aren’t with a broker through a traditional paper, newspaper. Do you need investors? If so, start creating a list of friends and family and let them know what you’re doing. Reach out to them. I suggest only doing this. If you have a track record, I’m a big proponent of only raising money after you’ve done a deal or too with your own money. So the process of actually purchasing a property will, number one, you’re going to be preliminary, reviewing a deal. And when you’re reviewing a deal, you’re doing the underwriting and you can give feedback back and forth to the broker and getting questions that you might have answered.

Charles:
You’re then going to submit an LOI. It’s a letter of intent. This littler intent will probably be returned on signed from the seller because there might be terms that they want, add it or edit it. So you’re going to negotiate the price and terms with the seller. Start reaching out to lenders if you’re raising money, and this is the first time doing, so start putting the bug in your potential investors ears. Now let them know I’ve got a deal coming. This is where it is and let them know that to be ready for it. When you’re going to be raising money, finalize it is the LOI with the seller and have it signed. So after you hash out all the details, have the seller sign, it, send the, execute it. Why to your attorney to start drafting the PSA purchase and sale agreement. If you’re doing a syndication, prepare the offer memorandum and send to potential investors.

Charles:
This is going to be your overview. It’s like the, it shows you the business plan of what’s going on with the numbers. You’re thinking what the costs are going to be, how many investors you need and how much you’re raising and purchase price and everything else. Reach out to your property manager and inform them of the acquisition. This is a great thing because you can get a little feedback from them. I have got a property now I’m going for under contract here under LOI at this point, because you haven’t really probably put up any money at this point, you’re still doing the PSA. So this is a great time to get some feedback from your property manager or if it sounds like there fuel, that’s good as well. You can then let them know. I’m going to reach out to you in the next couple of weeks.

Charles:
And let’s set up a time for doing the inspection. When I find out when that’s going to be start preparing for inspections and due diligence, reach out to inspectors, have them accordingly set with the property manager. If you’re doing a syndication, reach out to your sec attorney, start your due diligence over the next two to four weeks due diligence. You know, you’re going to be reviewing utility bills, bank statements, financials, Reno, review, everything, and there’s going to be a number of documents. And there’s gonna be a number of documents that you’re going to be asking for. And there’s gonna be a number of documents that you’re waiting on from the seller. Make sure that your due diligence period, doesn’t start until you have all the documentation, because if it takes them three weeks to send something, you’re not going to do your due diligence in one week, when you have a four week window perform onsite inspections, you know, walk every unit with inspectors and property managers, they’re going to be looking for different things.

Charles:
So you’re going to have inspectors are going to be making sure that what they’re inspecting is fine. So if they’re looking for, if they’re reviewing roof, if they’re looking at structure, if they’re doing engineering review, anything like this that they’re doing they’re going to be, they’re going to look at that. The property manager is going to be looking at pretty much the overview of it. They’re going to walk through is going to be certain things that they know are common issues. They’re going to be looking for them. And they’re going to be narrowing down where there might be issues and figuring out what the final hostage is with your rent renovation. You want to prepare the loan package for your lender. If you’re doing a syndication, reach out to investors to start confirming equity commitments, finalize the loan documentation for your lender. There’s going to be documents that you haven’t sent in that they’re requiring.

Charles:
And you’ve got to complete the whole package. If you’re doing a syndication start taking backup commitments in case investors pull out. If it’s your first invest, if your first inclination syndication, I suggest you raise 50% more than what you really do need because you’re going to have people kick out. It’s always better to have more investors than less. You’re almost set up your property specific LLC. So one, two, three main street, LLC, separate property with specific bank account. If you’re doing a syndication, you send out the final PPM to your investors, have them execute in and then wire funds to escrow, preferably one to two weeks before closing. And then what you do is you close and the whole process of repositioning and management begins. So I hope you enjoyed, please remember to rate, review and subscribe, submit comments and potential show topics at global investors, podcast.com. Look forward to two more episodes next week. See you then

Announcer:
Nothing in this episode should be considered specific, personal or professional advice. Any investment opportunities mentioned on this podcast are limited to accredited investors. Any investments will only be made with proper disclosure, subscription documentation, and are subject to all applicable laws. Please consult an appropriate tax legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Syndication Superstar incorporated exclusively.

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